What is globalization?

Globalization is the system of interaction

among the countries of the world in order to

develop the global economy.
Globalization refers to the integration of
economics and societies all over the world.
Globalization involves technological,
economic, political, and cultural exchanges
made possible largely by advances in
communication, transportation, and
infrastructure

Two types of integration

Positive
Negative

Negative integration
. Negative integration is the breaking down

of trade barriers or protective barriers such as

tariffs and quotas
By eliminating barriers, the costs of imported
raw materials will go down and the supply will
increase, making it cheaper to produce the
final products for export (like electronics, car
parts, and clothes).

Positive integration
Positive integration on the other hand aims at

standardizing international economic laws and

policies
For example, a country which has its own policies
on taxation trades with a country with its own set
of policies on tariffs.
Likewise, these countries have their own policies
on tariffs.
With positive integration, these countries will
work on having similar or identical policies on
tariffs

EFFECTS OF GLOBALIZATION

1. Improvement of International Trade.

Because of globalization, the number of

countries where products can be sold or
purchased has increased dramatically.
2. Technological Progress. Because of the
need to compete and be competitive globally,
governments have upgraded their level of
technology

3. Increasing Influence of Multinational

Companies. A company that has subsidiaries

in various countries is called a multinational.
Often, the head office is found in the country
where the company was established
The rise of multinational corporations began
after World War II.
Large companies refer to the countries where
their subsidiaries reside as host countries.
Globalization has a lot to do with the rise of
multinational corporations

4. Power of the WTO, IMF, and WB.

According to experts, another effect of

globalization is the strengthening power and
influence of international institutions such as
the World Trade Organization (WTO),
International Monetary Fund (IMF), and World
Bank (WB).

5. Greater Mobility of Human Resources

across Countries. Globalization allows

countries to source their manpower in
countries with cheap labor.
For instance, the manpower shortages in
Taiwan, South Korea, and Malaysia provide
opportunities for labor exporting countries
such as the Philippines to bring their human
resources to those countries for employment.

6. Greater Outsourcing of Business

Processes to Other Countries. China, India,

and the Philippines are tremendously
benefiting from this trend of global business
outsourcing.
Global companies in the US and Europe take
advantage of the cheaper labor and highlyskilled workers that countries like India and
the Philippines can offer

7. Civil Society. An important trend in

globalization is the increasing influence and

broadening scope of the global civil society.
Civil society often refers to NGOs (nongovernment
organizations).
There are institutions in a country that are
established and run by citizens.
The family, being an institution, is part of the
society.
In globalization, global civil society refers to
organizations that advocate certain issue or cause
eg womens rights, environment

An example of
globalization
As an example of the above integration,
consider the global market in milk and milk
products(powdered milk, cheese, butter).
A recent drought in Australia lessened the
amount of grass on which Australian dairy
cows feed,
thereby limiting the amount of milk these
cows produced for export.

An example of
globalization
At the same time a tax was levied by
Argentina on milk products which caused an
increase in milk prices,
which caused a decrease in milk exports.
These two events caused a shortage of milk
worldwide
which European dairy farmers could not fill
due to strict production quotas enforced by
the European union

An example of
globalization
Meanwhile, in China, higher per capita
consumption is caused by rising income
levels, which in turn caused and increased
demand of milk products.
All these events may have seemed isolated
and inconsequential to the average consumer,
but they were actually closely related in terms
of globalization
and resulted in a strong upward pressure on
the price of milk everywhere

WHEN DID GLOBALIZATION BEGIN?

Nayan Chanda
There are as many beginning points of

globalization as there are definitions of it, in

part due to the fact that different definitions
have different starting points.
Nayan Chanda from the Yale Center of the
Study of Globalization estimates globalization
began 8000 years ago,
because at that time all the forces that would
push globalization forward was already in
place

Chanda wrote the following in his 2007 book

Bound Together: "Essentially, the basic

motivations that propelled humans to connect
with others - the urge to profit by trading, the
drive to spread religious belief, the desire to
exploit new lands, and the ambition to
dominate other by armed might - all had been
assembled by 6000 BCE to start the process
we now call globalization".

Other views
Other possible starting dates are when

Christopher Columbus discovered the New

World in 1942,
the first time someone circumnavigated the
world in 1522,
The Industrial Revolution which began in the
late 18th century,
and the fall of the Berlin wall in 1989

View of the World Bank

Three 'waves' of globalization
The first began in 1870 and ended at the

beginning of World War I in 1914. It was

characterized by a reduction in trade barriers
and and improvement in transportation
technologies, which resulted in major
migration of about 10% of the world's
population.

View of the World Bank

The next wave occurred from 1950 to 1980

during which multiple trade agreements

occurred between developed nations which
left out the developing world.
The final(and current) wave of
globalization(beginning 1980) in contrast has
been characterized by the willingness of
developed nations to remove trade barriers in
order to attract foreign capital

Sum up
The starting point of 1820 is as acceptable as

any. It also fits the current consensus that

globalization, defined as world economic
integration, began somewhere between 18201870.
To sum up - The beginning of globalization
depends on the definition of the term, but
general academic consensus is that it began
between 1820 and 1870

ADVANTAGES OF GLOBALIZATION

 Faster growth: economies that have in the

past been open to foreign direct investments

have developed at a much quicker pace than
those economies closed to such investment
e.g. communist Russia
Cheaper imports: this is down to the simple
fact that if we reduce the barriers imposed on
imports (e.g. tariffs, quota, etc) then the
imports will fall in price

New technologies: by having an open economy

we can bring in new technology as it happens

rather than trying to develop it internally
Spur of foreign competition: foreign
competition will encourage domestic producers
to increase efficiency.
Carbaugh (1998) states that global
competitiveness is a bit like golf, you get better
by playing against people who are better than
you.

Increase consumer income: multinationals

will bring up average wage levels because if

the multinationals were not there the
domestic companies would pay less.

Increased investment opportunities: with

globalization companies can move capital to

whatever country offers the most attractive
investment opportunity.
This prevents capital being trapped in
domestic economies earning poor returns.

DISADVANTAGES OF GLOBALIZATION

Culture
The negative drivers of globalization included

culture which is a major hold back of

globalization.
An example of how culture can negatively
affect globalization can be seen in the French
film industry

The example of the

French
The French are very protective of this part of
their culture and provide huge grants to help
its development.
As well as government barriers market
barriers and cultural barriers still exist.

War and corporate

strategy
Also a negative aspect to a countries
development is war e.g. tourism in Israel fell
by 40% due to the latest violence.
Corporate strategy can also be a negative

driver of globalization as corporation may try

to locate in one particular area.

Job destruction
Destroys jobs in wealthy advanced countries.
This is due to the lower costs of wages in

developing countries.
Multinationals will move to areas of lower
wage levels at the drop of a hat

Loss of sovereignty
Also there is the loss of sovereignty that

globalization brings.
Many anti-globalization believers state that

nations are loosing their identity and selling

their soul

Environment
Then there are environmental factors of

globalization
such as chemical waste and air pollution.
Still, the cost of cleaning these effects up is
not included in the price of a product.
In many cases, specifically in the developing
world, manufacturers take advantage of lax
regulations and cause air pollution and
chemical waste without restraint.

Technology
Technology, though usually viewed as a

positive aspect of globalization, also has some

negative points
15% of the worlds population account for
nearly all the worlds technological advances.
This has to be a concern if developing
economies are ever going to catch up

The way out

In recent years some countries, such as

Taiwan, South Korea and Israel, have become

top rank innovators and with this their
economies have flourished.
This would indicate that perhaps the best way
to tackle world poverty is to provide aid
through education and technology